What's going on?

Stocks initially fell around the world on Monday following the failure of proposed US healthcare reform, but US stocks recovered most of their losses by the end of the day.

What does this mean?

The healthcare plan itself wasn�t that important to the overall market, but its failure reminded investors that it�s tough to get new policies passed in Washington. And that has potential repercussions for possible future policies that the market cares a great deal about, particularly corporate tax reform. While the failure of healthcare reform won�t necessarily disrupt other parts of President Trump�s agenda, investors appear to have become more pessimistic about America�s economic growth prospects as the political atmosphere has become more complicated.

Why should I care?

For the markets: The overall market�s calm is masking some big moves.

US stocks are down about 2% in March which, given the very significant run-up that the stock market experienced in the prior four months, is a very subdued pullback. However, certain segments of the market have a more dramatic story to tell: for example, stock prices of smaller US companies are down substantially (smaller US companies are more exposed to the US economy than big, multinational firms that have worldwide sales).


For you personally: A diversified portfolio was a good call during this selloff.

While certain segments of the stock market have sold off quite sharply, like bank stocks and smaller US companies, others have performed quite well, like utilities and some real estate companies. These stocks pay a high dividend, which investors typically view as a �safer� investment. For similar reasons, bonds have also gone up in value over the past week as investors seek out the steady cash flow that they offer. This month�s action has been a very good reminder of why diversification typically leads to a less risky portfolio.